Summary
An arbitration notice issued in 2022 for a money claim on works completed on 30.07.2000 raised an ex facie dead claim. The referral court should have rejected it at the Section 11 stage, and the Engineer-in-Charge's failure to issue a final certificate did not extend limitation. The High Court's order referring the dispute to arbitration was set aside.
Issues
- Whether a referral court under Section 11 of the Arbitration and Conciliation Act, 1996 may decline reference where the underlying claim is ex facie time-barred.
- Whether the Engineer-in-Charge's failure to determine the final amount payable extended limitation for the contractor's claim.
Provisions considered
- Section 11, Arbitration and Conciliation Act, 1996Although limitation is an admissibility issue, the referral court must prima facie examine and reject dead claims; where no intricate evidentiary inquiry is needed, an ex facie time-barred claim should not be referred. (¶¶ 1, 4, 5, 8)
- Section 43(2) read with Section 21, Arbitration and Conciliation Act, 1996For limitation purposes an arbitration is deemed to commence on the date referred to in Section 21, the date the respondent receives the request for reference; measured to the notice of 02.06.2022, the claim was hopelessly time-barred. (¶ 6)
- Article 18, Schedule, Limitation Act, 1963The three-year period for the price of work done applies to the claim for recovery of amounts for the works. (¶ 6)
- Article 137, Schedule, Limitation Act, 1963As held in Arif Azim, this governs the limitation for an application under Section 11(6), which is distinct from the limitation for the underlying claim. (¶¶ 4, 5)
Held
- The limitation for an application under Section 11(6) is distinct from the limitation for the substantive claim. Even so, the referral court must prima facie examine and reject non-arbitrable or dead claims so as to protect the other party from a costly arbitration. It leaves limitation to the arbitrator only where an intricate evidentiary inquiry is needed. (¶¶ 4, 5)
- Arbitration should be encouraged, but it cannot depart from the principle that law favours the diligent and not the indolent. The Limitation Act applies to arbitrations as it applies to court proceedings. A claim for money for works completed in 2000, raised for the first time by a notice seeking arbitration in 2022, about 21 years after the last communication of 04.01.2001, was ex facie dead and hopelessly barred under Article 18 of the Limitation Act. (¶¶ 5, 6, 7)
- The High Court erred in treating the Engineer-in-Charge's failure to determine the final amount as extending limitation. If there was such a failure, the contractor should have sought arbitration at once. Here it neither raised a final bill nor asked for the total amount to be determined. (¶ 7)
Result
Appeal allowed and the High Court's order referring the dispute to arbitration set aside; pending applications disposed of.